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Over 70% of US hotels are affiliated with franchises, offering brand recognition and centralized booking systems. Choosing the right franchise requires research into location, target market, costs, and reputation. Franchise agreements have unique policies and require standardization of service. The economic position and growth potential of the franchisor should also be considered. Due diligence is crucial for a successful relationship.
More than 70% of hotels in the United States are affiliated with franchises, a chain of individual properties connected by a single brand, or hotel chain, with central management. If you want to open or buy a hotel, there are many advantages to being affiliated with a hotel franchise. These advantages include the immediate brand recognition of a property and the credibility of being associated with a well-known entity with a centralized booking system. To choose the best hotel franchise, you will need to consider aspects such as location, target market, costs of becoming a franchisee, and the reputation and financial strength of the hotel chain, as well as the support and services it provides.
Selecting a hotel franchise requires some background research, and a good place to start is to evaluate the property itself. It is important to consider factors such as location and target market. Hotel owners in Europe might think twice about associating with brands known only in the US. Likewise, hotels that want to emphasize value should avoid franchises known to be luxurious and expensive.
The royalty fees and overheads – including using the general booking system and loyalty program – required to join a hotel franchise can be high, so it’s also worth exploring various chains to see which one provides the most best value for membership. Startup costs tend to vary widely based on the reputation and value of a particular brand. There are several companies that provide a service to help franchisees evaluate their options. When performing a cost-benefit analysis, it is important to consider the number of new customers that a hotel franchise affiliation can provide.
Franchisees may be subject to unfavorable rules included in the franchise agreement, and hotel franchises have unique policies that may affect the operations of an individual property. Most franchises require standardization of service that may not be in the interest of every potential owner. Similarly, franchises often have prominent logo placement requirements that affect the branding of an individual property. Early termination of a franchise agreement usually results in a severe penalty. The legal contracts associated with franchise licenses generally protect the franchisor from lawsuits; therefore, these factors must be considered when choosing a franchise and before agreeing to a contract.
Joining a hotel franchise is an investment. The economic position of a potential franchisor must be considered before agreeing to an affiliation. The future of the brand and its growth potential are also important factors when evaluating a hotel franchise, as well as the centralized services it offers to its hotels. Franchise agreements are often long-term agreements – occasionally spanning several decades – the long-term viability of a franchise is especially important.
It can also be helpful to contact current franchisees and make use of online resources when evaluating hotel franchises. The decision to join a franchise is likely to drastically affect the future of a property. Careful consideration of available options and due diligence will help ensure a successful relationship.
Asset Smart.
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